Pattern recognition receptors represent the first line of defense against invading pathogens. Herpes simplex virus (HSV) encodes multiple ligands detected by these receptors, yet persists in the majority of infected individuals indicating a breakdown in host defense against the virus. Here we identify a novel mechanism through which HSV immediate-early protein ICP0 inhibits TLR-dependent inflammatory response by blocking NF-kappaB and JNK activation downstream of TLR signal activation. This process depends on ICP0-mediated translocation of USP7 (HAUSP) from the nucleus to cytoplasm. We show that nuclear USP7 migrates to the cytoplasm in response to TLR engagement, a process that contributes to termination of TLR response. Cytoplasmic USP7 binds to and deubiquitinates TRAF6 and IKKgamma, thus terminating TLR-mediated NF-kappaB and JNK activation. These findings suggest that USP7 is part of a negative feedback loop regulating TLR signaling and that ICP0 exploits this physiologic process to attenuate innate response to HSV. ICP0 inhibition of the TLR response serves to uncouple the innate and adaptive immune response, thereby playing a key role in HSV pathogenesis and persistence.